Only the bazooka approach can save the jobless young

Chris Grayling’s attempt to blame our worsening unemployment problem on the eurozone crisis masks th

The coalition continues to talk down the problem of youth unemployment, which has hit the million mark, or 21.9 per cent of the youth labour force under the age of 25 (24.7 per cent for young men). This contrasts with 6.5 per cent for those aged between 25 and 49 and 4.7 per cent for those aged over 50. Youth unemployment rates in the UK are higher than in Denmark (13.9 per cent), Germany (9.1 per cent), the Netherlands (8 per cent), Austria (7.1 per cent), Norway (8.2 per cent) and the United States (17.4 per cent). The overall UK unemployment rate of 8.3 per cent is the highest since 1996 and our total of 2.6 million people unemployed is the highest since 1994.

Selective judgement

The employment minister, Chris Grayling, claimed: "These figures show just how much our economy is being affected by the crisis in the eurozone. Our European partners must take urgent action to stabilise the position." This claim was met, quite rightly, with widespread incredulity, as the problems in the eurozone did not begin in earnest until August. The spreading crisis will raise these numbers even higher in the next nine months or so if the government does not respond with a bazooka, which it seems to have no intention of doing.

But I wanted to address another issue to which the coalition pointed. On the Department for Work and Pensions website it said: "Today's figures show a rise in the number of unemployed 16-to-24-year-olds to 1.02 million, although the number of full-time students looking for a job rose to 286,000, leaving the underlying number of youth unemployed at 730,000." Lies, damned lies and statistics. The International Labour Organisation's definition of who is employed and who is unemployed is used by both Eurostat and the OECD in every country:

Definition of in school: a young person who is enrolled in "full-time" education and is neither working nor seeking work. [Note, students who work should be classified among the employed and students looking for work should be classified among the unemployed.]

It seems appropriate to clarify a number of misconceptions about what is going on in the youth labour market. First, it is true that there are 286,000 students who are looking for part-time jobs but who are classified as unemployed. As the table (below) shows, there has been a growth of 32,000 in this number since the third quarter of 2010 (Q3 2010), not least because students who are paying tuition fees are likely to be short of cash. (I take all data from Q3 2010 as the coalition's to own.)

Blanchflower table

However, the other side of this coin is that there are 811,000 students employed part-time who are counted in the employment count. If you remove those in full-time education who are looking for a job, you should also remove all of those who hold a part-time job from the employment count. It's as daft as that.

Second, the main increase in unemployment since Q3 2010 has been among those who are not in full-time education, which has risen by 80,000. Third, the coalition has been quick to argue that unemployment among the young increased in the years up to 2008. It is clear from the table that that is what occurred, with unemployment rising by 124,000 between Q1 2000 and Q1 2008 - but this ignores the rise in the youth population by half a million over that period. Subsequently, the size of the youth population has fallen quite sharply.

It appears that increases in youth unemployment in the years 2000-2008 were driven by an increase in labour supply, whereas since then the increase has been driven by a collapse in labour demand. Since 2004, the inflow of workers from EU accession countries has increased competition among the youth for jobs.

The logic of cuts

Fourth, the number of youngsters in full-time education increased during the period 2000-2008 and fell slightly during Q1 2008-Q2 2010 under the Labour government. However, under the coalition, the figure has fallen by 83,000, which is one reason why unemployment numbers have jumped: education is a good alternative to unemployment. Cutting the number of places in full-time education in the depths of a recession makes little sense.

Fifth, there are 36,000 16-to-17-year-olds who have been continuously unemployed for at least 12 months; among 18-to-24-year-olds the figure is 224,000 and 89,000 of them have been out of work for at least two years. Long-duration unemployment is particularly harmful, and these are prime candidates for membership of a lost generation. Finally, and worst of all, the focus on unemployment misses the bigger picture, which is the rapid fall in youth employment. Between 2000 and 2008, youth employment increased by roughly 300,000, but since Q1 2008 it has fallen by 625,000, even though overall employment has fallen by only 435,000 - raising the number of jobs available to those aged over 25 by 190,000.

We now have a crisis of youth joblessness. Many young people apparently believe that they will never find a job. George Osborne has an opportunity in his autumn statement on 29 November to turn this situation around, but, alas, I remain far from hopeful that he will.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 28 November 2011 issue of the New Statesman, The rise of the muslim brotherhood